Statutory Maternity Pay (SMP) is paid through the employer’s payroll exactly like normal salary — subject to income tax via PAYE, Class 1 National Insurance, student loan repayments, and pension contributions. The interaction creates four practical effects that catch employees off-guard during and after the 39-week SMP period.
For the SMP rate and eligibility rules, see SMP Rate 2026-27 UK.
1. SMP is taxable income — but tax code may auto-adjust
PAYE applies SMP at the employee’s existing tax code in the same way as regular salary. For an employee on the standard 1257L code with no other complications, the personal allowance (£12,570 in 2026-27) is spread across all 52 weeks of the tax year — and the cumulative tax basis means each pay packet’s tax depends on year-to-date totals, not just that week’s pay.
The mid-year tax code adjustment
HMRC monitors PAYE returns in near-real-time via Real Time Information (RTI). If an employee’s year-to-date earnings drop significantly mid-year due to maternity leave, HMRC may issue a revised tax code reducing the in-year withholding to avoid a year-end refund. The revised code typically increases the personal allowance allocation to the remaining months.
In practice this happens slowly — often the employee doesn’t see the adjustment until 3-4 months into maternity leave, by which point the cumulative under-withholding has built up. Most employees end the tax year with a tax refund for the under-claimed personal allowance during the high-AWE weeks 1-6.
Year-end refund pattern
A typical example: an employee earning £50,000/year goes on maternity leave 1 July 2026.
- April-June 2026: Normal salary at £50,000 × 3 months = £12,500. Tax at PAYE = £2,000 approximately.
- July-March 2027: SMP at £194.32/week × 33 weeks + £692.31/week × 6 weeks = £6,412 + £4,154 = £10,566.
- Total taxable income 2026-27: £23,066.
- Income tax owed at 2026-27 rates: £10,499 (after £12,570 PA) × 20% = £2,099.
- Income tax paid by PAYE during the year: ~£3,200 (based on year-start projection of £50K).
- Refund expected: ~£1,100 via P800 or Self Assessment.
The refund is typically issued by HMRC in May-July of the following tax year (via P800 if not Self Assessment).
2. Class 1 National Insurance — paid on SMP at normal rates
SMP is subject to the same Class 1 employee and employer NI as regular salary:
- Employee Class 1 (primary): 8% on earnings above £12,570 / year (or proportionally per pay period).
- Employer Class 1 (secondary): 15% on earnings above £5,000 / year (or proportionally) — Autumn Budget 2024 changes effective April 2025.
For a £40,000 salary going on SMP:
| Pay component | NI implications |
|---|---|
| Pre-leave salary (April-June, 13 weeks) | Normal NI both sides. |
| Weeks 1-6 SMP (90% AWE = ~£692/week) | NI at normal rate; both employer and employee. Material because still above NI threshold. |
| Weeks 7-39 SMP (£194.32/week = below NI threshold) | Below the £242/week primary threshold. Zero employee NI. Employer NI still due above £96/week (secondary threshold) — so employer pays NI but employee does not. |
The NI gap during weeks 7-39 is a small benefit to the employee — about £15-25/week of NI saved depending on salary. But it stacks with the income tax under-withholding to make the post-SMP refund larger.
3. Pension contributions during SMP — the asymmetric mandate
UK auto-enrolment rules (Pensions Act 2008) require employers to maintain pension contributions during maternity leave as if the employee were still receiving normal salary. This is the asymmetric pension mandate:
| Party | Contribution during SMP |
|---|---|
| Employee | Based on actual SMP received (e.g., £194.32/week — small contribution). |
| Employer | Based on pre-leave normal salary (e.g., £40,000/year — full contribution as before). |
So an employee on £40K base, with 5% employer contribution and 5% employee contribution, sees during the SMP period:
- Employee contribution: £194.32 × 5% = ~£9.72/week
- Employer contribution: £40,000 ÷ 52 × 5% = ~£38.46/week
The employer contribution is 4x the employee’s contribution during SMP — a significant tilt of the pension funding burden during this period. Employees should not stop their contributions during SMP unless they want to break the symmetric matching incentive in normal periods.
This asymmetry is statutory and the employee cannot opt out without losing the auto-enrolment status; the employer cannot reduce their contribution without similarly losing it.
4. Keeping in Touch (KIT) days — paid at full salary
The 10 permitted KIT days during maternity leave are paid at full normal salary — not at SMP rates. The KIT day is treated as a normal work day for tax, NI, and pension purposes:
- Tax: Withheld at the cumulative PAYE basis, which often means a higher marginal rate for that pay period.
- NI: Employee and employer Class 1 at normal rates on the KIT day pay.
- Pension: Both employee and employer contribute based on the full-salary KIT day pay (so the employee contribution for that pay period is meaningfully higher than during pure-SMP weeks).
The KIT day does not extend SMP — the 39-week SMP period continues to count down even on KIT days. The result: KIT day pay is on top of SMP, not instead of.
For an employee earning £40K base, a KIT day pays:
- Daily rate: £40,000 ÷ 52 ÷ 5 = £153.85
- Plus SMP for that week: £194.32 (unchanged — the KIT day doesn’t subtract)
- Total weekly pay for a week with 1 KIT day: £153.85 + £194.32 = £348.17
The KIT day pay is often the highest weekly pay during the 33-week post-cliff SMP period, because it’s calculated on full salary.
5. Student loan repayments during SMP
If an employee is repaying a student loan via PAYE:
- During the first 6 weeks (90% AWE, often above the repayment threshold): repayments continue at normal rate (9% above the threshold).
- During weeks 7-39 (SMP at £194.32/week = below all student loan thresholds): zero student loan repayments.
The 33-week pause in student loan repayments is a structural feature, not an error. It can save £1,000+ in student loan repayments during a single maternity leave — meaningful over a 30-year repayment horizon.
6. Holiday accrual and the post-return holiday cliff
Statutory holiday entitlement (5.6 weeks/year for full-time) continues to accrue throughout the 52-week leave. A 12-month full leave accrues 5.6 weeks of holiday during the leave itself — typically taken in the months after return.
Most employees return to work with 5-6 weeks of accrued unused holiday. This can be:
- Taken immediately on return (extending the effective return-to-work date).
- Used as part of a phased return (3 days a week for the first 6 weeks).
- Paid out at the employee’s request, subject to employer policy.
The accrued holiday is paid at full normal salary, not SMP rate. For high-earners, this is the single largest income event in the year following maternity leave.
7. SMP and the £100,000 personal allowance taper
For employees earning above £100,000, the personal allowance phases out by £1 per £2 of income above £100,000. SMP-period earnings dropping below £100,000 may temporarily restore some personal allowance — but the recalculation is done on the full-year basis.
For a £130,000 / year employee taking 6 months SMP:
- Pre-leave (6 months): £65,000 of normal salary at £130,000 annualized → expecting £30,000 of PA phaseout (back to £0 PA).
- Post-leave SMP (6 months): £6,500 of SMP.
- Total taxable income: £71,500. Personal allowance fully restored ($71,500 < $100,000).
- Refund: significant — the year-start PAYE assumed £130K and zero PA.
The phaseout-restoration refund is one of the largest post-maternity tax refunds, often £8K-£15K for £130K+ earners taking half a year of leave.
8. Common mistakes
- Stopping pension contributions during SMP. Loses the asymmetric employer match. Stay enrolled, accept the small employee contribution.
- Not requesting tax-code review. HMRC may not automatically adjust if the leave doesn’t span an RTI threshold. Call HMRC to request mid-year revision if the under-withholding accumulates.
- Forgetting to file Self Assessment if normally required. Even with reduced income, if the employee is in SA, the 2026-27 return is still due 31 January 2028. Maternity-year refunds are often largest via SA reconciliation.
- Treating KIT day as a “free” payment. KIT days are fully taxable — high marginal rate for that week.
- Not coordinating with childcare benefits. Universal Credit / Tax Credits / Childcare Costs in Universal Credit all use current income. SMP-period drops can trigger or increase support — but the income recovery on return can cause clawback. Run the Take-Home Pay Calculator at multiple income points.